As the United States keeps an eye out for signs of deflation there, it has learned one lesson from Japan’s battles.

“By doing nothing, you will make the problem worse,” said former U.S. Vice President Dan Quayle.

In an interview with The Japan Times in Tokyo on Thursday, Quayle, who is currently serving as a special adviser to U.S. investment trust fund Cerberus Capital Management, said of Japan’s deflationary spiral of critical proportions: “We’ve had a lot of talk, but we’ve had inaction. We’ve had a lot of proposals for reform, but the anti-reformers have won.”

Japan’s falling asset prices exacerbate the bad-loan problems, which in turn act as a drag on bank lending and prevent central bank funds from boosting prices up.

The government is now pledging to toughen up classification on banks’ problem loans. Furthermore, the government’s debt collection agency and another new public-private body will buy up banks’ bad loans, nurse some companies back to health and force others to fail.

“Set a time period on when that government agency goes out of existence,” said Quayle, who served as vice president when the savings and loan institutions crisis erupted in 1989, ultimately requiring a $150 billion bailout.

“Get as many assets as possible in there and then get them back into the economy,” he added.

Quayle said tough political decisions have to be made before employment and incomes start to grow. “But it has to happen.”

Of course, a little more political stability would help, he noted.

“One of the political reforms that Japan really needs to adopt is to elect a prime minister for four years,” Quayle said. Japan has seen more than 10 prime ministers in the last 15 years.

That makes it difficult to make the tough political decisions that are necessary, Quayle said. With a four-year term, leaders can take political risks in their first two years in office before worrying about re-election the last two years.

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